Tenant changed mind

Question from Doug updated on 16th September 2014:

If a tenant signs a fixed-term contract and then changes their mind half way through, are they responsible to pay the rental until the fixed term is up? What, as a landlord, can we do to recover the money we are going to loss until we can organise another tenant? Bearing in mind that the property is not in the same city we live in. Regards, Doug

Our expert Alan Bruce responded:

Under the Residential Tenancies Act 1986 (the Act), a fixed term tenancy cannot be ended by either party giving notice to terminate the contract before the agreed end date. Either party can approach the other to see if they are agreeable to ending the tenancy agreement by mutual consent. Any agreement should be in writing clearly stating the terms associated with the tenancy ending earlier. Another option that allows a tenant to exit a fixed term tenancy is a process called ‘assignment’. Assignment is where a tenant wants to leave and have someone else take over their interest in the tenancy. Once a suitable replacement for the tenant has been found, the obligations of the departing tenant(s) continue until the day the assignment takes effect. This includes responsibility for paying the rent as well as anything that happens up until the day the new tenant takes over, but not after that date. A landlord who agrees to an assignment can recover the actual and reasonable costs associated with the assignment of the agreement from the tenant such as advertising costs and credit check fees. The Ministry has prepared an information sheet for parties who want to end their fixed term tenancy before the agreed end date. You can read this information here: http://www.dbh.govt.nz/tenancy-ending-fixed-term-info. If you have any further questions about the assignment process you can call 0800 TENANCY (0800 836 262) between 8.00am-5.30pm Monday to Friday to speak with a member of our Tenancy Advice team. You can also visit our website: www.dbh.govt.nz/tenancy-index.

The Ministry of Business, Innovation and Employment provides information and guidance on building law and compliance, services including weathertight homes, and advice for tenants and landlords.